Irish health insurance controversy

Actuary Mercer found itself at the centre of a political storm in Ireland last month when minister for health Mary Harney accepted the advice of the firm that it was not yet necessary to introduce risk equalisation compensating payments to Voluntary Health Insurance (VHI) from BUPA and other competitors. The minister found herself under attack for allegedly favouring the foreign BUPA at the expense of the local VHI.

The background to the controversy is that health insurance in Ireland is community-rated rather than being conventionally priced according to actuarial characteristics of individual risks such as age. In order for such a system to be sustainable following the advent of competition for the VHI, it was necessary to provide for risk equalisation payments in the event that new competitors including BUPA attracted better risks.

The Minister was eventually obliged to publish the advice from Mercer (see www.dohc.ie/publications/pdf/advice_mercer .pdf?direct=1) which is an interesting analysis of the pros and cons of introducing risk equalisation at the present time. It does, however, seem unlikely that risk equalisation can be much longer delayed.